Condominium Costs
Living in a condominium means you must be aware of three key expenses:
- monthly common expense fees
- reserve fund
- special assessments.
Monthly Common Expense Fees
Monthly fees cover the costs of keeping common elements in good repair. They also cover the operating costs of things like fitness facilities, party rooms and swimming pools.
If the condominium has staff, such as security and concierge, these costs will be covered by monthly condo fees.
Monthly fees may cover all, some or none of the costs of your utilities. Before you buy, make sure you know:
- what services are included in your monthly common expense fees
- if you need to pay certain costs in advance
- what your monthly operating costs will be.
You are directly responsible for your share of the operating expenses of the condo. You and other owners will have to increase your monthly common expense payments, if necessary, to keep up with rising costs.
Reserve Fund
A portion of your monthly common expense fees goes to build up a reserve fund. A condo corporation must set up a reserve fund for the major repair and replacement of common elements. These can include the roof, exterior of the building, roads, sidewalks, sewers, heating, electrical, plumbing, elevators, laundry and recreational facilities.
The corporation must hire a qualified professional such as an architect or engineer to conduct a reserve fund study. This study:
- recommends how much money is needed for the reserve fund
- includes a site inspection that estimates how long the major components of the condominium, together with replacement costs of each component, will last
- is designed to help keep the condo property in good repair
- reduces the risk that owners will need to pay a special assessment to make sudden major repairs
- must be presented to the board for approval.
New condominium corporations must complete a reserve fund study within one year of registration. The fund must be fully funded by the end of the following fiscal year. On a continuing basis, the corporation must conduct reserve fund studies every three years.
A Caution for Buyers of Newly Built Condo Units
New condo owners are sometimes unpleasantly surprised to find their budgets strained by significant increases in monthly expenses. Such increases are common during the second or third year of ownership.
Builders estimate monthly expenses, but it isn’t until the board of directors takes over – and conducts the first reserve fund study – that you begin to know the true costs of maintaining the building.
Special Assessments
A special assessment is a fee over and above monthly common expense fees. Special assessments may be charged to help pay for unexpected major repairs or shortfalls in the reserve fund.
The same percentage that determines an owner’s share of monthly common expenses is used to determine your share of any special assessment. The percentage for each unit is set out in the declaration.
A special assessment must be approved by the condo board.
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